Americans showed a slight increase in spending in February, rebounding from a decline in January, according to the latest report from the Commerce Department. Retail sales rose 0.6% last month, with higher gas prices and increased auto sales contributing to the growth. However, when excluding sales from gas stations and auto dealers, sales only rose 0.3%. The report also revealed that inflation ticked up 0.4% from January to February, impacting consumer spending.
David Silverman, a senior director at Fitch Ratings, noted that consumer spending on discretionary goods is expected to be soft in 2024 due to factors like inflation and reduced savings. There is also a shift in consumer spending from goods to services, with restaurants showing an uptick in sales. Kayla Bruun, a senior economist at Morning Consult, added that consumers are making trade-offs with their budgeting, favoring services spending over goods categories.
Department stores, clothing and accessory stores, and furniture and home furnishings stores all saw declines in business in February. Online sales also showed a rare decline of 0.1%, while electronics and appliance stores experienced a solid 1.5% increase. The strong jobs market and rising wages have supported household spending, though rising credit costs and higher prices have made consumer spending more erratic. The U.S. economy added 275,000 jobs in February, highlighting its resilience despite efforts to curb inflation by the Federal Reserve.
Retailers like Walmart, Target, and Macy’s have reported that customers are looking for deals and sticking to essential purchases. Target’s CEO, Brian Cornell, mentioned that customers are more constrained in their spending, using credit cards to navigate through higher costs like rent and gas prices. Chris Riccobono of Untuckit noted that customers are waiting for items to go on sale before making purchases, signaling a shift from pre-pandemic shopping behaviors. Despite some hesitancy in spending, Untuckit plans to add 14 more stores this year.
Overall, the February retail sales report reflects a mixed picture of consumer spending, with some sectors experiencing declines while others show growth. The ongoing impact of inflation and rising prices continues to influence consumer behavior, prompting retailers to adapt their strategies to meet changing customer preferences. As the economy continues to navigate challenges related to inflation and rising costs, consumers are likely to remain cautious with their spending habits in the coming months.
